It’s budget time at the State Capitol. Last week the Democrats (majority party) released a list of the budget targets for the seven major subcommittee budgets (i.e. Education, Health and Human Services, etc.). While this is helpful to begin the work necessary to pass a budget, it only represents approximately half of the total budget picture. Among budget items yet to be determined or disclosed are expected “revenue adjustments” (tax increases), funding for property tax credits to counties, and targets for the unassigned standings bill. The standings bill contains such big ticket items as K-12 school aid and state employee salary increases.
Governor Culver’s budget proposal released three weeks ago increased the state’s spending level by about ten percent over last year’s budget. This past week, the Democrats’ proposal requests an additional $6.6 million above the Governor’s proposed recommendations. Given the budget presented by the Democrats is only a partial list and already spends more than the Governor’s recommendations, it is my best guess the total increase in spending for budget year 2008 will be greater than ten percent.
The Democrats have assured us their budget proposal is fiscally sound. Based on the partial information received so far, I would argue this is analogous to me claiming I am fiscally responsible if I say I have enough money to cover my mortgage, but I’m not sure how I am going to cover my car payment, insurance, power bill, groceries and other expenses.
I say this because the Governor and the Democrat’s budget is based on the premise the Legislature will pass a $1 per pack cigarette tax increase, anticipated to generate an additional $139 million. While nothing is ever certain, I believe the cigarette tax will pass. However, there is no guarantee the increase will be $1 per pack. In addition, the cigarette tax bills currently being considered in the House and Senate dedicate all or a portion of the money to health care. It is clear the proposed budgets need the cigarette tax revenue to pay for increases in other areas in order to make the budget viable.
To generate an additional $25 million in revenues, Governor Culver has proposed changing Iowa’s corporate reporting law. This law, which allows Iowa businesses that sell to customers outside of Iowa to remain competitive, may be difficult to pass the Legislature. Certainly not a given.
For an additional $21 million in revenues, the Governor has proposed a “tax amnesty” program and has also asked the Department of Revenue to step up their collections on delinquent taxes. While this will take no legislative action and is a good idea, other states that have used a “tax amnesty” program have found it to bring in far less money than anticipated.
Based on the statements above, I believe the proposed budget is not built on solid assumptions. In my opinion, it may be possible to pass a budget this year that contains a ten percent or higher increase based on questionable revenue sources, but at some point the Legislature will either be faced with substantial budget cuts or additional tax increases.
As always, you can contact me in the following ways:
E-mail: carmine.boal@legis.state.ia.us
Home Address: 3301 SW Timber Green Road, Ankeny
Home Phone: 964-3335